Time to Buy Nvidia Options

NVIDIA stock has capitalized on Intel's recent security issues

Jan 5, 2018 at 10:43 AM
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The shares of NVIDIA Corporation (NASDAQ:NVDA) have started 2018 with a bang, on pace for their best week since September, as chip stocks have rallied in the face of Intel's (INTC) recent security issues. Specifically, NVDA stock is set to notch a weekly gain of 9.6%, and is trading within a chip-shot of November's all-time highs. Nevertheless, Nvidia options are practically on sale right now.

The security's Schaeffer's Volatility Index (SVI) of 29% is in just the 6th percentile of its annual range, pointing to relatively muted volatility expectations priced into NVDA's short-term options. Meanwhile, the stock sports a Schaeffer's Volatility Scorecard (SVS) of 95, indicating NVDA shares have handily exceeded options traders' volatility expectations in the past year -- another boon for would-be premium buyers.

Since 2008, there have been seven times when Nvidia stock was trading near a 52-week high and simultaneously sported a low SVI. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, NVDA averaged a one-month gain of 2.59% after these signals. With the shares currently trading around $212.10, a similar pop would put the equity around $217.60 -- just shy of record-high territory.

Plus, despite NVDA stock's long-term uptrend, there's plenty of room on the bullish bandwagon. In fact, half of the 24 analysts following the shares maintain "hold" or worse opinions, leaving the door open for potential upgrades to lift the chip stock even higher.


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